Let’s get started by understanding what this refinancing stuff is all about. Basically, it is shifting your home loan from one bank to another with the goal of saving on interest payments.
Unless you have been living under a rock you would have seen countless bank adverts talking about their cheap rates and benefits of refinancing along with all the other stuff they try and flog us. If you’re anything like me when it comes to ads my eyes gloss over and I actually don’t absorb any information (pretty ironic comment considering what I’m trying to do with this blog). In fact my wife accuses me of tuning out for a number of other things that I’m not going to get into. My point is that there might be some value in those ads and here is why.
While all bank ads focus on the benefits of their product they do tend to gloss over the cost side of things. You’ll normally find it in the fine print that I can say I’ve never read. So, how much are the refinancing costs? The reality is that these days it doesn’t cost that much. I’m talking about $700 for most people. That will normally cover the admin fee from your old bank, settlement and government registration.
Logically, it’s worth making a change if you going to save at least $700 over a 2 year time period. In most of the cases I deal with the savings have more that covered the costs. What’s even better is that there are deals out there where your new bank will even cover the cost of the change.
Now, if you’re the, I’m too busy type, ask yourself “how much is your time worth?” Most people work 40 hours a week and get paid an average of $1,100 after tax. So check your current interest rate because a reduction of 0.50% will save you $1,500 on a $300,000 home loan. Pretty decent pay rise if you ask me. And if you still can’t be bothered give us a call and we’ll do the work for you.
Find out more about refinancing.